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Cuts forcing clients to ‘revert to type’

Several clients are “reverting to type” in the face of the deepest and “most vicious” recession ever seen by many building services contractors, according to senior members and staff at the HVCA.

They fear the industry could suffer long-term damage due to the return of unfair contract conditions and payment terms.

HVCA president Martin Burton told H&V News tight margins and onerous conditions are again the norm, with 2011 set to see the industry face “numerous and profound” challenges.

He warned that many construction clients were failing to grasp the principle of “best value” and were in danger of missing their sustainability goals and undermining quality.

“Things are unbelievably tough out there,” he said. “However, things would be considerably worse if we did not have the Construction Act in place, which at least gives us a legal mechanism for recovering our money - something we did not have during the last recession. Also, the sustainability agenda offers huge potential business opportunities.”

The Act has created an improved ‘payment culture’ and the HVCA is working with the government to protect it, according to head of commercial and legal affairs Roderick Pettigrew.

“We are looking forward to changes this October that will improve the scope of the Act,” he added. “But tender processes are in chaos because of multiple pre-qualification schemes and we are urging the coalition to promote the use of a new industry standard scheme (PAS91).”

The association has expressed concerns over the number of civil servants available to work on issues relevant to building services procurement following the spending cuts. Mr Pettigrew added that the government must make progress on the eradication of retentions.

There is also growing unease that progress made in rebuilding trust between supply chain members is regressing as clients pile pressure on contractors to cut prices.

“Sub-economic tendering is not in anyone’s interests,” said HVCA president-elect Bob Shelley. “We spent years improving the trust between our sector and main contractors, but it doesn’t take long to lose it - and once it is gone it is very hard to get back.”

The return of widespread sub-economic tendering could have a damaging effect well beyond the current recession, said previous president Graham Manly.

“The big fear is that short-termism will become the norm and companies will adjust their business models accordingly. Once adjusted, these are unlikely to be reversed for many years, if ever.”

He added that many procurers were looking to subcontract their own risks.